Intel Results Cool Downturn Fear

SAN JOSE, Calif. — Intel reported record third-quarter revenue of $14.7 billion and said it expects revenue to rise about $100 million in its next quarter. The news shows that fears sparked by Microchip's CEO of a broad industry downturn appear unfounded.

Microchip, often seen as an industry bellwether, triggered alarm late last week when it said its net quarterly sales would be about 3% below its expectations. Microchip's CEO predicted an industry downturn, sending many tech stock prices down, including Intel's.

Microchip blamed the downturn on a slowdown in China and a buildup in inventory in the distribution channel. In a call with financial analysts, Intel’s CFO Stacy Smith was asked about the Microchip report.

“We’re watching the markets all the time. Did we do a triple check after Microchip? We did and we’re not seeing anything unusual out there,” he said.

Intel reported third-quarter revenue of $14.6 billion, up 5% from the second quarter and 8% from the same quarter last year. Net income rose 19% from the second quarter and 12% from the same period last year to $3.3 billion.

"We are pleased by the progress the company is making," Intel CEO Brian Krzanich said in a press release. "We achieved our best-ever revenue and strong profits in the third quarter. There is more to do, but our results give us confidence that we're successfully executing to our strategy of extending our products across a broad range of exciting new markets."

Intel listed several key trends for the quarter:

PC group revenue was $9.2 billion, up 6% from the second quarter and 9% from a year earlier.

Server group revenue was $3.7 billion, up 5% from the second quarter and 16% from a year earlier.

The new Internet of Things group recorded revenue of $530 million, down 2 percent from the second quarter but up 14% from a year earlier.

On the analyst call, Intel said it doesn’t expect it’s mobile and communications group to be profitable in 2015, but it is making progress toward that goal. Some of its current products are sold at a loss but future versions such as the Sofia chip sets will narrow those losses, Smith said.

The 3G version of Sofia co-developed with China's Rockchip is running in the labs, starting validation and on track to ship before the end of the year, said Krzanich on the analyst call.

Both the partnerships with Rockchip and with China’s Spreadtrum are “focused on Sofia” making products that are “designed by people in that ecosystem and very cost efficient,” he said.

Intel fielded many questions about its growth in PCs which it attributed to market share gains, better inventory management and other factors. Executives made it clear they still see the overall PC market as flat this year and long term with “stability in the U.S. and softness in China and South America,” Krzanich said.

Speaking on process technology, Krzanich noted that in the quarter “14nm yields improved meaningfully but we remain behind where we expected to be.”

Smith said the quarter also saw “the front edge of start-up costs associated with 10nm right in line with the historical trend.”